More global brands are expected to enter India in 2016 as they begin to realise the country’s untapped potential.

The retail sector is likely to witness a cheerful 2016 thanks to some positive initiatives undertaken by the government. In 2015, single-brand retail saw relaxation in sourcing norms, which is expected to rack up FDI inflows in the near future. Moreover, in the 2016-17 Budget, 100 per cent overseas capital was allowed in processed food retailing via Foreign Investment Promotion Board (FIPB) route.

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The FDI inflow in retail trading rose between October 2014 and September 2015 to $70.75 million. This, coupled with economic stability, liberalisation of the FDI policy and improvement in the consumer sentiment, is expected to help global brands witness a very conducive environment for investment into Indian retail as well as retail real estate sectors. Add to this the steady rise in shoppers’ desire to consume foreign brands due to increased brand awareness, and the scenario looks all the more inviting.

More global brands are expected to enter India in 2016 as they begin to realise the country’s untapped potential. This will make development of world-class malls with superlative designs and ambience. Retail real estate has been constantly evolving in response to changing consumer, brands and retailers’ preferences but the evolution is bound to become faster in the days ahead. This will lead to emergence of stronger retail real estate players, who may manage to get private equity (PE) investment in the coming years.

PE investment has been largely confined to a few retail players in India. In 2015, PE investment into retail properties alone was $39 million, and in 2016, it is expected to be in the range of $75-80 million.

What else will happen in 2016?

In 2016, PE may also go into select mall investments, especially in under-represented markets or for buyout of mature assets. Single-brand retail companies will find more reasons to explore the Indian market thanks to relaxation of sourcing norms and technology-led retail will start entering in single brand retail store category in 2016. These companies will also be able to undertake e-commerce business independently.

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Moreover, as quality mall space is coming up with strong pre-commitments, it indicates that retailers continue to remain bullish about the long-term India consumption story. Retailers are already starting to experiment with the formats, sizes for the same brands – adapting to markets – as they start moving up the value chain. At the same time, the lack of quality retail space will continue to cast its shadow in 2016. Retailers will have to redo their real estate strategy and adopt a flexible approach customised to different micro-markets. Investment by both home-grown and international brands will strengthen in tier-II and tier-III markets as they expand beyond tier-I cities. Investment by large players will also be seen in 2016.